Financial Daily from THE HINDU group of publications
Wednesday, May 26, 2004
Consolidation to place Amtek Auto in top gear
New Delhi , May 25
WITH seven acquisitions in two years, auto components manufacturing major Amtek Group is set to focus on consolidation in the coming year. It will also focus on other modes of expansion, including setting up a new plant overseas in either China or Mexico in the next one year.
In consolidation mode, the Group's flagship company, Amtek Auto, is set to bring under its fold Amtek Siccardi (owned 100 per cent by Amtek) and Benda Amtek (in which Amtek has a 92 per cent stake). The company had a couple of months back hiked its stake in Benda Amtek to 92 per cent, after buying out IFCI's stake in the venture. Benda Amtek also has a 100 per cent subsidiary, Lloyds Brierly Hill. The Group presently has two listed entities, Amtek Auto and Amtek India.
Amtek Auto presently has three subsidiaries, namely Smith Jones (Midwest), Amtek Investments (through which the company owns GWK Amtek) and Ahmednagar Forgings.
``Following completion of this exercise, in the second phase of restructuring in 2005-06, we are considering a merger between Amtek Auto and Amtek India. Subsequently, we may even amalgamate the subsidiaries under Amtek Auto with the parent,'' Mr S. Singhi, CFO, Amtek Group, told Business Line. Ernst & Young has been appointed as advisors for the restructuring and will be submitting its report by June-end.
The consolidation process will give Amtek Auto (taking into account the soon-to-be-absorbed subsidiaries - Amtek Siccardi, Benda Amtek, and Lloyds Brierly Hill) a turnover of Rs 2,500 crore in the next year (the company follows a June financial year) and Rs 3,000 crore in 2005-06 (when Amtek Auto is merged with Amtek India).
Apart from giving Amtek Auto a large scale for operations, the restructuring will also help in saving costs, including up to 20 per cent cost savings in outsourcing.
Amtek's inorganic growth strategy has paid rich dividends. In fact, out of the expected Rs 2,500 crore turnover, approximately Rs 1,600 crore comes from the recent acquisitions.
The overseas acquisitions, Smith Jones (Midwest) in the US and GWK in the UK, has also given the company access to major global OE manufacturers such as MG Rover, Toyota, Ford among others.
In fact, the Group is looking to leverage its OE tie-ups in setting up a plant outside India.
Further, with an export target of Rs 600 crore in two years time, Amtek is planning to invest about Rs 125 crore towards expanding capacity at its plants in India post 2005.
Amtek manufactures machined components, forgings and castings.
Amtek Auto's share price has risen sharply in recent months, particularly due to increased FII interest in the company.
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